Employer Payroll Contributions
Employee Income Tax
As of July 2021, the Fair Work Commission confirmed the national minimum wage in Australia as 20.33 AUD per hour, 772.60 AUD per month for a full-time award-free adult employee who is not an apprentice or a trainee.
The minimum award rate will increase by 2.50% across all award classifications. This award wage increase will take place in three stages, from the first full pay period on or after 01 July 2021, 01 September 2021, and 01 November 2021, respectively, depending on the award that applies. Each classification level has a different minimum pay rate.
Most states fall under the Fair Work Act 2009 and work to the national minimum wage, including Queensland. However, there may still be some exceptions for state or local government employees.
Employees in Australia are employed on contracts that stipulate the pay cycle, and although there are part-time, casual, and independent contractor pay types with set pay cycles, the most common are;
- Monthly payroll (with payment due by the last day of the month)
- Bi-weekly payroll (with payments due every second week on a set day, usually mid-week, Wednesday, or Thursday)
- Bi-monthly payroll (with payment due on the 15th and the 30th, respectively).
There is no legislation for 13th-month payments in Australia.
The National Employment Standards (NES) sets the maximum number of working hours at 38 hours a week; this applies to all employees covered by the national workplace relations system, regardless of any award, agreement, or contract.
All overtime requests must be agreed upon between the employee and the employer. Employers need to provide an assessment of whether additional hours are “reasonable” before approving overtime. The rates are generally set within the contract/awards, most commonly 200.00% of the regular salary pay rate for the first 3 hours of overtime and 150.00% of the typical salary pay rate thereafter.
However, additional allowances and higher overtime pay rates may be stipulated within the employee agreement/contract/award. This higher rate also applies when working overtime on weekends, public holidays, nights, or in difficult/unpleasant conditions.
All employees (except for casual employees) get paid annual leave as stipulated by The National Employment Standards (NES) contained in the Fair Work Act 2009 (Cth). In general, all employees are entitled to a minimum of 4 weeks paid leave (5 weeks for shift workers). Furthermore, the NES states that awards, contracts/agreements cannot contain any less than this minimum, but they can contain a greater number of days.
The NES also states that if the period during which an employee takes annual leave includes a public holiday, a period of another kind of leave (including sick leave, personal leave, etc.), that time is not regarded as annual leave. Annual leave is paid at the same rate as the regular salary rate, but in exceptions within the employee’s award/contract/ workplace agreement, there can be an additional annual leave payment due of up to 17.50%
In addition, each state in Australia has an entitlement for employees to have extended service leave. For New South Wales, it is two months’ leave after ten years of service, with one month’s leave for each subsequent period of five years of service after that.
The NES entitles permanent employees to 10 days paid sick leave and two days of paid compassionate leave a year (personal/carers leave).
An employee may take this paid personal/carer’s leave if they are unfit for work because of their own personal illness or injury or provide care or support to a member of their immediate family.
See parental leave below.
See parental leave below.
The Paid Parental Leave Act 2010 (Cth) provides financial support to eligible working parents of newborn or recently adopted children. Paid parental leave is paid to the child’s primary carer for up to 18 weeks of pay based on the national minimum wage rate. The new leave policy, effective from July 2021, allows both parents to take two weeks concurrently at the time of birth, adoption, or surrogacy and up to 12 weeks separately to assume primary care duties. An employee is not entitled to parental leave under the NES unless they have 12 months of continuous service or are a “long-term casual employee.” The casual employee must have been employed regularly and systematically for at least 12 months.
Eligible working fathers and partners (including same-sex partners) also get two weeks’ leave paid at the national minimum wage.
Employers can also provide for paid parental leave in registered agreements, employment contracts, and workplace policies which do not affect the employee’s eligibility for the Australian Government’s Paid Parental Leave Scheme so the employee can be paid both.
In addition, employees who have worked for more than 12 months are entitled to at least 12 months of unpaid parental leave if the employee is or will be responsible for caring for a child or adopted child under 16 years old.
The NES stipulates employees are entitled to be absent from work for three main reasons, all to undertake community service activities.
- Jury duty(Jury duty is paid, when employees take leave for jury service, they receive jury service pay from the government and employers then top this up to their usual pay for up to 10 days at the rates set at the time)
- Voluntary emergency management activity (unpaid leave)
- Activity in community service that the regulations prescribe (unpaid leave)
The leave period includes reasonable travel and rest time prior to, and following the eligible activity, and the employee must aim to provide as much prior notice and information as possible.
There are several complex laws relating to termination processes in Australia. To ensure the correct process is followed, employers must adhere to the four key areas below to ensure the termination of an employee for the right reasons.
- Capacity – if an employee lacks the ability or capacity to complete the job
- Performance – unsatisfactory performance of the employee, which is outlined clearly to the employee with the opportunity for them to rectify their conduct
- Misconduct – failing to adhere to workplace standards, or if the employee is involved in serious misconduct
- Redundancy – if the job the employee is completing is no longer necessary for the business, or technological change has made their role unnecessary
Employees must have completed six months of service (12 months for a small company) before they can make an unfair dismissal claim.
An additional legal requirement for the employer is to provide the employee with an employment termination letter that must include confirmation of:
- the reason for the termination
- the date of the employee’s last day of work
- the fixed number of payments/entitlements etc. and any unpaid wages the employee will receive as final pay
The Fair Work Act 2009 (Cth) stipulates that the minimum notice periods for termination varies with the employee’s length of service as below:
less than 12 months – one week notice
Between 1 & 3 years – two weeks’ notice
Between 3 & 5 years – three weeks’ notice
More than five years – four weeks’ notice
In addition, if an employee is over 45 years of age and has completed at least two years’ continuous service, there is a requirement for an additional week of notice.
However, it is common practice in Australia for the award/contract/ workplace agreement to have a more extended period of notice than the minimum requirement; this is commonly four weeks’ notice. Despite the minimum notice periods provided in the Fair Work Act 2009 (Cth), employees who have no notice period specified in their contract of employment may be entitled to what is called in Australia ‘a reasonable period of notice’.
The “reasonable period of notice” will set a notice period of greater than the norm, and minimum, for employees with long lengths of service and/or where equivalent jobs/skills are in short supply.
An employer must not terminate an employee unless they have given the minimum period of notice or paid the employee instead of giving notice. This is paid at the employee’s full pay rate as if they had worked the minimum notice period.
All employees must be paid the full final pay as detailed in their award/contract/ workplace agreement together with the appropriate notice-related payments/documentation.
Should an employee be made redundant, redundancy pay is based on the amount of continuous service the employee has and paid based on their regular base salary pay rate as below:
At least one year but less than two years – four weeks
At least two years but less than three years – six weeks
At least three years but less than four years – seven weeks
At least four years but less than five years – eight weeks
At least five years but less than six years – ten weeks
At least six years but less than seven years – 11 weeks
At least seven years but less than eight years – 13 weeks
At least eight years but less than nine years – 14 weeks
At least nine years but less than ten years – 16 weeks
At least ten years – 12 weeks*
* There is a reduction in redundancy pay from 16 weeks to 12 weeks for employees with at least ten years of continuous service. This is consistent with the 2004 Redundancy Case decision made by the Australian Industrial Relations Commission.
The commonly used probation period is six months (12 months for a small company), although this can be greater or less as stated in the award/contract/ workplace agreement. The Fair Work Act 2009 (Cth) does not refer to probation periods. Still, it stipulates that the award/contract/ workplace agreement must clearly specify the period of probation set and how and when performance is to be reviewed.
Under the Migration Act 1958 and the Migration Regulations 1994, employers have a legal obligation to ensure all employees have the right to work in Australia. Even if they already live in Australia and are not Australian Citizens, they may be permanent residents or New Zealand Citizens on a special class of visa that allows them to remain in Australia indefinitely or have a temporary visa. All these types of visas need to be checked regularly by the employer via the Department of Home Affairs’ online verification system, the Visa Entitlement Verification Online (VEVO).
Suppose employers cannot find the appropriate person with the required skills/experience etc., for a job. In that case, applications can be made to sponsor workers temporarily or permanently. However, skilled workers must generally be included on the “Skilled Occupations List,” and the length of sponsorship is set by the length of time in the sponsored visa. However, this approach has been significantly affected by COVID-19, where many employees have been made redundant/reduced hours, etc. The Department of Home Affairs is now more focused on ensuring that no foreign workers will take a job opportunity from one that could place an Australian.
There are several ways to sponsor a skilled foreign worker:
- Sponsor a skilled worker for permanent migration through the Employer Nomination Scheme (ENS) or the Regional Sponsored Migration Scheme (RSMS)
- Sponsor a worker on a temporary visa through the Temporary Skill Shortage visa (subclass 482), which allows overseas people to come to Australia to work for up to 4 years.
- Take over the sponsorship of temporary migrants already in Australia on skilled work visas.
- Enter a labor agreement that allows you to employ several overseas skilled workers on a permanent or temporary basis by entering a formal labor agreement with the Australian government if the job is not on the Skilled Occupations List.
The standard rate of GST in Australia is 10.00%.